ii view: Studios unit is star of ITV's show

Potential for M&A activity and with the shares offering an attractive dividend yield. Buy, sell, or hold?

20th August 2025 15:26

Keith Bowman from interactive investor

First-half results to 30 June

Total revenue down 3% to £1.85 billion
Media & Entertainment (M&E) revenue down 8% to £955 million
Studios revenue up 3% to £893 million
Adjusted pre-tax profit (EBITA) down 31% to £146 million
Interim dividend unchanged at 1.7p per share
Net debt up 14% to £586 million

Guidance:

Now expects to deliver annual cost savings of £45 million in 2025, up from a previous £30 million
Expects to pay a full-year dividend of at least 5p per share, unchanged from last year

Chief executive Carolyn McCall said:

"ITV is now a leaner, more digital business in a strong position to compete and succeed in a changing market. We have the agility and capability to make the most of new revenue opportunities while driving profitable growth, strong cash generation and attractive returns to shareholders.

"We are on track to deliver our 2026 key financial targets, with sustained good growth in ITV Studios and ITVX coupled with strategic cost management as we reshape our cost base to reflect the dynamics of the industry in which we operate."

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ii round-up:

ITV (LSE:ITV) is an integrated producer and broadcaster.

The Studios business produces, owns and distributes content for both ITV channels and third parties in the UK and overseas such as the BBC, Netflix Inc (NASDAQ:NFLX) and Amazon.com Inc (NASDAQ:AMZN) owned Prime.

The group’s Media and Entertainment business delivers content through linear TV broadcasting as well as via digital on-demand or the company’s streaming platform ITVX.

For a round-up of these latest results announced on 25 July, please click here.

ii view:

First broadcasting in 1955, ITV today employs just over 6,000 people. The Studio business generated most adjusted profits (EBITA) during 2024 at 58%, with Media & Entertainment the balance of 42%. Geographically, the UK accounted for most sales in 2024 at 63%. That was followed by the USA at 19% and other countries the balance of 18%.

For investors, hindered revenues and profits given the tough comparative of last year’s football euros again underline the importance of the sporting calendar in generating ad sales. Restrictions on advertising of less healthy foods on Ofcom-regulated TV and streaming services before 9pm, and all day for online, will soon be introduced with some potential negative impact. A forecast price/earnings (PE) ratio above the three-year average suggests the shares are not obviously cheap, while the internet has left ITV competing against rivals such as Alphabet Inc Class A (NASDAQ:GOOGL) owned YouTube, Netflix, and even China’s TikTok.

More favourably, a diversity of revenue exists from programme content sales to monthly streaming subscription fees for ITVX and advertising sales. Cost savings continue to be pursued with cumulative savings now totalling £235 million since 2019. Bolt-on acquisitions for the Studio business have included UK producer Moonage Pictures, creator of The Gentleman on Netflix, while robust cash flows have underpinned more than £1.4 billion of shareholder returns since 2018.

On balance, intense competition and the now global business of streaming generate reason for caution. That said, potential M&A activity and the possibility of an eventual split of the two businesses, as well as a forecast dividend yield of almost 6%, offer reasons for continuing interest.

Positives:

Diversity of revenues
Attractive dividend (not guaranteed)

Negatives:

Intense global competition
Advertising revenues are economically sensitive

The average rating of stock market analysts:

Hold

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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